Telecommunications tariff

A telecommunications tariff is an open contract between a telecommunications service provider and the public, filed with a regulating body such as state and municipal Public Utilities Commissions and federal entities such as the Federal Communications Commission (FCC). Such tariffs outline the terms and conditions of providing telecommunications service to the public including rates, fees, and charges.

Reasons for tariffs

At a minimum, tariffs imposed must cover the cost of providing the service to the consumer. The consumer may be the final user or an intermediary such as a service provider. If a telecommunications operator cannot recover its costs, it will make a loss and the company will go bankrupt. Tariffs must also be used to cover maintenance, additional research and other indirect costs associated with providing the service. However, telecommunications service providers must be careful not to over-price each service, as prices have a direct influence on demand for that service (see supply and demand). Such an operator must constantly balance the need to provide cheaper rates, especially if there is strong competition, with the cost of maintaining the service at an optimum quality that is acceptable to the customer. If an operator charges too much, it risks alienating its customers, resulting in a loss of traffic and therefore revenue; if they charge too little, they will have insufficient capital to maintain the network's quality of Service. Over time this will result in customer attrition.

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